BoJ Eases. Einstein Rolls Over In Grave

"It won't be long before CPI is back above 1%", we promise, this time - we really mean it - is seemingly how the BoJ defends its decision to follow Einstein's definition of insanity by doing the same thing over and over again expecting a different outcome (Nov 2008 was the last time CPI was above 1% YoY). Admittedly, at some point the ever-increasing BoJ balance-sheet-to-GDP will become too much even for a nation hell-bent on printing its way out of chronic deflation only to be punched-and-kicked by a balance-sheet-recession so deep and full of deleveragers. The facts are that the BoJ will expand its LSAP-equivalent program by JPY10tn (USD123bn) - raising the 'stock' - but maintaining the same pace of JGB-buying at JPY1.8tn per month - leaving the 'flow' stable - hence extending the program by around six months. At the same time they have extended the maturity of JGB purchases from 2Y to 3Y (try and wring a little more duration out of an already starved yield curve). USDJPY was entirely confused out of the gate and rallied immediately only to about-face and sell-off up to 81.45 before already giving back half of its losses to pre-BoJ anouncement. The JPY sell-off implicit carry moves did nothing to move US equity futures (which limped up 1-2pts and then gave it back) and even the NKY has retraced 65% of its post-BoJ gains. Perhaps it is all about the flow and the need for that second derivative to be constantly rising after all? Whether it is repatriation flows or carry-unwinds, JPY devaluation (as we have discussed Andy Xie's perspective on) may just have to be done 'forcefully' as opposed to 'suggestively'.

Full summary of the BOJ's action:

USDJPY's rip-dip-and-leak-back-higher...

and the NKY has lost over 65% of its post-BoJ gains already - quite a half-life...